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Transport ETFs at a Glance Post Q2 Earnings

Sweta Killa

The transportation sector saw some pullbacks this earnings season with stock prices dipping 0.3% (aggregate one-day stock market reaction to earnings releases) in response to earnings announcements.

Total earnings of 100% of the sector’s market capitalization that has been reported so far is up 5.1% on revenue growth of 4%. Earnings and revenue beat ratios of 86.7% and 40%, respectively, are encouraging as most industry players managed to beat on either earnings or revenues or on both counts (see: all the Industrials ETFs here).

For a better understanding, let’s dig into the earnings results of some well-known industry players:

Transportation Earnings in Focus

The world's largest package delivery company United Parcel Service’s UPS top and the bottom line beat the Zacks Consensus Estimate. Earnings of $1.96 were 3 cents ahead of the consensus mark while revenues of $18.04 billion edged past the estimated $17.96 billion. For 2019, the company expects earnings per share in the range of $7.45-$7.75. The Zacks Consensus Estimate at the time of earnings release was pegged at $7.46.

Major railroads Union Pacific UNP and Kansas City Southern KSU delivered better-than-expected earnings as well as revenues while Norfolk Southern Corp NSC missed on the same. Union Pacific’s earnings outpaced estimates by 10 cents while the same at Kansas City topped the mark by 4 cents. Revenues trumped the Zacks Consensus Estimate by $36 million and $10 million, respectively. Meanwhile, earnings of $2.70 at Norfolk Southern missed the Zacks Consensus Estimate by 7 cents and revenues of $2.93 billion marginally came below the consensus estimate by $4 million.

U.S. airlines Delta Air Lines DAL and United Continental UAL also beat on both earnings and revenues. Earnings and revenues at Delta edged past the Zacks Consensus Estimate by 6 cents and $62 million, respectively. At United Continental, earnings of $4.21 and revenues of $11 billion exceeded the Zacks Consensus Estimate of $4.04 and $11.36 billion, respectively (read: Time to Buy Airlines ETF on Mixed-to-Upbeat Earnings?).

For 2019, Delta raised its earnings per share guidance to $6.75-$7.25 from $6-$7. The Zacks Consensus Estimate was pegged at $6.93 per share at the time of earnings release. United Continental tapered its full-year earnings outlook by lifting the lower end of the range from $10-$12 to $10.5-$12. The Zacks Consensus Estimate at the time of earnings release stands at $11.20 per share.

Last but not the least, earnings of the leading trucking carrier J.B. Hunt JBHT surpassed the Zacks Consensus Estimate by a couple of cents. However, revenues of $2.26 billion marginally fell short of the consensus estimate of $2.28 billion.

ETFs in Focus

Decent results have led to mixed trading in transportation ETFs over the past month. SPDR S&P Transportation ETF XTN has inched up 1.2% while iShares Dow Jones Transportation Average Fund IYT and First Trust Nasdaq Transportation ETF FTXR have slipped 0.6% and 3.8%, respectively.

XTN

This fund tracks the S&P Transportation Select Industry Index holding 43 stocks in its basket. The in-focus firms account for more than 2% share each. Further, about 34.7% of the portfolio is dominated by trucking while airlines, and air freight & logistics take around one-fourth share each. With AUM of $140.5 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 13,000 shares a day. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook.

IYT

The fund tracks the Dow Jones Transportation Average Index giving investors exposure to a small basket of 20 securities. The in-focus six of the seven firms make up for the top 10 holdings with a combined 45.7% share while Delta Airlines accounts for 3.5% share. From a sector perspective, railroads, and air freight & logistics take the largest share with 31.7% and 25.9% share, respectively, while airlines and trucking round off the next two spots with double-digit exposure each. The fund has accumulated nearly $538.8 million in AUM and sees solid trading volume of around 255,000 shares a day. It charges 43 bps in annual fees and has a Zacks ETF Rank #4 with a High risk outlook (read: Transport ETFs in Focus on FedEx Earnings Beat).

FTXR

This fund offers exposure to the 30 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. The in-focus seven firms represent a combined 32.2% share. Ground freight & logistics takes the top spot at 29.5% while airlines, auto & Truck manufacturers as well as auto, truck & motorcycle parts round off the next three. FTXR has accumulated $2.3 million in its asset base and charges 60 bps in annual fees. Average trading volume amounts to meager 4,000 shares. FTXR has a Zacks ETF Rank #4.

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